A local restaurant tracks a loyalty program with 100 starting customers, 120 ending customers, 40 new customers, and $240 in free dinners redeemed. What was the customer retention cost?

A local restaurant tracks a loyalty program with 100 starting customers, 120 ending customers, 40 new customers, and $240 in free dinners redeemed. What was the customer retention cost?

• A. $6
• B. $12
• C. $2
• D. $3

Answer: (D)

To find the retention cost, focus on how many of the original customers stayed and how much was spent to keep them engaged. Start with the idea that the ending count includes both returning original customers and new ones. Subtract the number of new customers from the ending total to see how many of the starting group remained: 120 ending minus 40 new equals 80 customers retained from the starting 100. The loyalty program spent $240 on free dinners for these customers. Divide the total spend by the number of original customers who were retained: 240 ÷ 80 = 3. So the customer retention cost is $3 per retained customer.

To find the retention cost, focus on how many of the original customers stayed and how much was spent to keep them engaged. Start with the idea that the ending count includes both returning original customers and new ones. Subtract the number of new customers from the ending total to see how many of the starting group remained: 120 ending minus 40 new equals 80 customers retained from the starting 100. The loyalty program spent $240 on free dinners for these customers. Divide the total spend by the number of original customers who were retained: 240 ÷ 80 = 3. So the customer retention cost is $3 per retained customer.